First off, a property appraisal is an estimate of the market value of a property. It is conducted by a professional appraiser and is the price that, based on different factors, they believe is the appropriate value the property could be sold for. The most common property appraisal involves homes. Homeowners can agree on a price with buyers, but not until the property appraiser weighs in.
In the event of a cash-only home purchase, an appraiser may not be needed. But appraisers are critical third-parties who have the expertise to confirm a deal by providing an evaluation of a property’s value. Creditors and lenders often rely on the expertise of home appraisers to determine the value of mortgages. With that in mind, let’s explore all you need to know about property appraisals.
What Is A Home Appraisal?
A home appraisal refers to a value analysis of one’s property by a licensed/certified appraiser that is hired by creditors during the home purchase or refinance process. That is because lenders need accurate property appraisal while providing a mortgage loan and want to ensure they aren’t giving too much money to the home buyer. If you haven’t had a property appraisal before, then at some point when selling or buying a home, you will see it firsthand. Get your free property value estimate now, before finding your next home. This will allow you to know what kind of equity you have in the property before you sell. Overall, an appraiser typically evaluates the exterior and the interior of the property, conducts research, and carries out any instructions as needed by the lender. The property buyer shoulders the cost of the entire exercise, and it is usually under $1000.
Property Appraisal Process
Step 1: Seller And Buyer Verbal Agreement
After two parties, the seller and the buyer, agree on a price, an appraisal is scheduled as early as possible to allow enough time for a visit to the property and processing of the property appraisal report. The lender drives the process as they are responsible for selecting an appraiser, who goes ahead to contact the seller and agree to an appropriate date and visitation time.
Step 2: Appraisal Inspection
Conducted by the appraiser, this process involves a review of the home’s exterior and interior to ensure everything is in good structural shape. Moreover, the appraiser takes note of any safety issues, number of rooms and bathrooms and evaluates any major upgrades done since the last real estate transaction. And during the review, the appraiser takes photos of the different parts of the home. Depending on the type of lender, the appraiser may need to test the different appliances and utilities to ensure they are still in perfect working condition.
Step 3: Research
The appraiser researches homes recently sold in the property market to do comparative analysis before determining the property’s value in question. It is mainly done on homes with the same characteristics as the current one and is located in the neighborhood.
Step 4: Decoding Your Property Appraisal Report
After the report has been compiled, the seller will assess the final appraisal value. And if the figure is similar or closer to the proposed sales price, then the loan shouldn’t have any complications.
An appraisal report generally includes:
- The market value of the property and its validity dates.
- The key features and characteristics of the property.
- Property location and its background information.
The Bottom Line
A property appraisal report is an estimate of the value of the property on the market. It is vital for lenders as a basis for the determination of mortgage or loan values. Besides, it gives buyers more bargaining power that allows them to renegotiate.